MBA 601

Business Information System

Department of Management
Admas University
Information System(IS)

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 Content

 Basic Concepts

 System Concept
 Perspectives on Information Systems

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 Basic Concepts: Data Vs Information

 Data consists of raw facts, such as an employee

number, total hours worked in a week, inventory part
numbers, or sales orders.
 Data relates to transactions, events and facts.
 E.g. 12/12/2018, 13, 24, Yaris XLE, Alice, Bob, black,
01/01/2020
 Information
 Information is data that has been processed in such a way
as to be meaningful to the person who receives it.
 Example: Bob purchased a black car, model Yaris XLE on
December 12, 2018; it was sold by Alice (salesperson 13)
applying a 24 month payment plan. Warranty expires January
1, 2020.

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 Basic Concepts: Data Vs Information
 Characteristics of Valuable Information
 Relevance - Relevant information is important to the decision maker. Information
showing that lumber prices might drop might not be relevant to a computer chip
manufacturer
 Timeliness - delivered when it is needed. Knowing last week’s weather
conditions will not help when trying to decide what coat to wear today.
 Accuracy – error free. In some cases, inaccurate information is generated
because inaccurate data is fed into the transformation process
 Economical - Information should also be relatively economical to produce.
 Reliability: Reliable information can be trusted by users.
 Complete – complete information contains all the important facts. E.g. an
investment report that does not include all important costs is not complete.
 Understandability
 Security – information should be secure from access by unauthorized
users.

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DIKW Pyramid

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 Basic Concepts: Information sources
 Oral
 Observation - Natural - Experimentation
 Recorded knowledge
 Primary
 Original, records of events or evidence as they are first described or
actually happened without any interpretation or commentary
 E.g. letters, diaries, memoirs, photographs, interviews, manuscripts, official
documents - census, reports, legislation, scholarly journals
 Secondary
 analyzed, interpreted documents. They often try to describe primary
sources
 E.g. textbooks, literacy criticism, political analyses and commentaries
 Tertiary- these are sources that index, abstract, organize, compile, or
digest other sources. 
 E.g. Dictionaries, fact books, Wikipedia, manuals, handbooks, indexing, etc.

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 Classification of Information
 Classification by Characteristic
 Strategic Information: concerned with long term policy
decisions that defines the objectives of a business and checks
how well these objectives are met.
 Example: acquiring a new plant, a new product, diversification of
business etc.
 Tactical Information: is concerned with the information
needed for exercising control over business resources, like
budgeting, quality control, service level, inventory level,
productivity level etc.
 Operational Information: is used to ensure proper
conduction of specific operational tasks as planned/intended
 Example: Various operator specific, machine specific and shift
specific jobs

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 Information Overload
 Examples of massive data sets
 MEDLINE text database: 25 million published articles
 Google: Order of 10 billion Web pages indexed
 100’s of millions of site visitors per day
 Retail transaction data: EBay, Amazon, Walmart: order of 100
million transactions per day
 AT&T handles over 300 million calls daily to serve about 100 million
customers
 NASA generates several GB of data per hour through its Earth
Observing System
 Information overload represents a state of affairs where an
individual’s efficiency in using information in their work is
hampered by the amount of relevant and potentially useful
information available to them.
 Information overload occurs when information received becomes a
hindrance rather than a help given that the information is potentially
useful.
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 Information Overload(cont’d)
There is a need to extract knowledge (useful
information) from the massive data.

Facing too enormous volumes of data, human

analysts with no special tools can no longer make
sense.

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 Basic Concepts: System
 A system is a group of interrelated components
working together toward a common goal by accepting
inputs and producing outputs in an organized
transformation process.

S1 Subsystems
S2
Systems Boundary
(defines its scope of activities) S4 Output
Systems Input S3

Environment

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 System: Example
 Human Body
 Elements : Head, Hand, Legs, Heart, Eyes, etc.
 Objective : To make human life comfortable, tolerable and
possible.
 Computer
 Elements : Monitor, CPU, Keyboard, Printer, Disks, Software
etc.
 Objective : Data Processing.
 Business Organization
 Elements : Men, Machine, Material, Method Money etc.
 Objective : Maximization of Profit

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 Characteristics of a system
 Purpose – every system has one or more objectives
to achieved such as for business profitability
 Components – one part or a number of parts
grouped together – a subsystem.
 Interrelated components
 function of one component is related to the function of
another component
 output from one is an input for another – dependence of a part
on one or more other parts.
 Input/output – system takes input from the
environment and delivers output

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 Characteristics of a system(cont’d)
 Interfaces – each component must have to connect
with each other. E.g. socket in your room with the
electric system
 System Boundary – separates the system from other
systems;
 all components within the boundary; establishes the limits of the
system;
 Constraints – there are limits to what the system can do
(capacity, speed, capability); some imposed within the
system itself, some by the environment (e.g. available
resources, deadlines).
 Environment – it is a part outside system boundary.

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 Types of System
 1. Physical and Abstract System
 Physical System
 A physical system is a set of tangible elements operates together to
accomplish objectives. For example – Computer system, Circulatory
system, Transportation system etc.
 Abstract System
 Also known as Conceptual system, Abstract system is an orderly
arrangement of concepts, ideas, of theories. E.g. Political System

 2. Open and Closed

 Open
 The system which interacts with its environment.
 It takes input from environment and gives output back to environment.
E.g. Business organization
 Closed
 The system which does not interacts with its environment.
 It neither take input nor provides output to environment Self contained,
self sufficient systems.
 It remains uninfluenced by the environmental changes.
 E.g. Digital Watch
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 Information System
 Is an organized combination of people, hardware,
software, communications networks and data
resources that collect (input), manipulate (process),
store, and disseminate (output) data and information
and provide a corrective reaction (feedback
mechanism) to meet an objective.

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 Components of IS
 People - are those individuals who work with the
system or use its output.
 Hardware - computer equipment used to perform
input, processing, and output activities.
 Software - computer programs that govern the
operation of the computer.
 A network is a telecommunication system connecting
hardware that is wired, wireless, or a combination that
allows the transmission and sharing of data.
 Database – shared collection of logically related data,
designed to meet the information needs of an
organization
 Procedures - include the strategies, policies,
methods, and rules for using the IS.
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 Information Technology (IT) versus
Information System (IS)

 IT focuses on maintaining the system's hardware,

software, databases, and networks, with the end goal
of communicating to users how to best utilize its
functionality.
 IS refers to the management of an entire set of
information, and it includes not only the technology
components involved, but the people and processes
as well.
 In theory, IS could be paper based
 But we will focus on Computer-Based Information
Systems (CBIS)

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 IS in business
 Sales & Marketing
 Identifying Customers
 Creating customer awareness
 Selling
 Manufacturing
 Assembly product
 Checking quality
 Producing bills of materials
 Finance & Accounting
 Creditors
 Creating financial statements
 Managing cash accounts

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 IS in business(cont’d)
 Human resources
 Hiring employees
 Evaluating performance
 Enrolling employees in benefit plans

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 Why firms use IS?
1.Operational excellence - IT tool to achieve greater
efficiency and productivity
2.New products, services, and business models. E.g.
Apple’s iTunes and Netflix
3.Customer and supplier intimacy
4.Competitive advantage – a product or service that
an organization’s customers place a greater value on
than similar offerings from a competitor
 achieve higher sales and profit through using IS by:
 Doing things better
 Charging less for superior products
 real time responding

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 Why firms use IS?(cont’d)
5.Improved decision making
 Without accurate information:
 Managers must use forecasts, best guesses, luck
 Leads to:
 Overproduction, underproduction of goods and services
 Misallocation of resources
 Poor response times
 Poor outcomes raise costs, lose customers
 IS provide real-time data for making decisions
 E.g. Verizon’s Web-based digital dashboard to provide
managers with real-time data on customer complaints,
network performance, line outages, etc.
6.Survival
 Information technologies are necessity of doing business
 Changes in industry-level E.g. ATM, mobile banking, etc.

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 What should a Business Professional
know about IS?

 Foundation Concepts: fundamental behavioral,

technical, business and managerial concepts
 Information Technology: Hardware, software,
networks, data management and Internet-based
technology
 Business Applications: Major uses of the IS in the
organization
 Development Processes: How to plan, develop and
implement IS to meet business opportunities
 Management Challenges: The challenges of
effectively and ethically managing IT

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Perspectives on Information Systems
 Information Systems are more than computers

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1. Technological dimension of information systems

 Computer hardware and software

 Data management technology
 Networking and telecommunications technology
 Networks, the Internet, intranets and extranets, World Wide Web
 IT infrastructure: provides platform that system is built on

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2. Organizational dimension of the IS

 Competitive advantage can not be created just by having

the best technology.
 People must accept it and used it in a clever and strategic
way.
 Using Information Systems to achieve competitive
advantage
 From a business perspective, information systems are part of a
series of value-adding activities for acquiring, transforming, and
distributing information that managers can use to improve decision
making, enhance organizational performance, and, ultimately,
increase firm profitability.

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 Organizational dimension of the IS(cont’d)
How Information Systems Impact Organizations and Business Firms?

FLATTENING
ORGANIZATIONS

Information systems
can reduce the
number of levels in
an organization by
providing managers
with information to
supervise larger
numbers of workers
and by giving lower-
level employees
more decision-
making authority.

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 3. Management dimension of IS
 Managers set organizational strategy for responding to business
challenges
 In addition, managers must act creatively:
 Creation of new Business models
 Occasionally re-creating the organization
 Generic strategies for dealing with competitive forces, enabled by using IT
 Low-cost leadership
 Produce products and services at a lower price than competitors while enhancing quality
and level of service
 Examples: Wal-Mart
 Product differentiation
 Enable new products or services, greatly change customer convenience and experience
 Examples: Google, Nike, Apple
 Strengthen customer and supplier intimacy
 Use information systems to develop strong ties and loyalty with customers and
suppliers; increase switching costs
 Example: Netflix, Amazon
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